The Ex‐Dividend Day Behavior of Stock Prices: A Re‐Examination of the Clientele Effect

ABSTRACT

Past studies have documented an ex‐dividend day price drop which is less than the dividend per share and positively correlated
with the corresponding dividend yield. In contrast to prior work, we show that, without additional information, the marginal
tax rates cannot be inferred from this phenomenon which is, therefore, not necessarily the result of a tax induced clientele
effect. Despite adjustments for potential biases in earlier work, however, the correlation between the ex‐dividend relative
price drop and the dividend yield is still positive which is consistent with a tax effect and a tax induced clientele effect.